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July 14 — The prospective trans-Atlantic trade deal could be less attractive without the U.K.
in the European Union, a senior U.S. trade official said.

U.S. Trade Representative Michael Froman said July 14 that the U.S. certainly wants
to continue to pursue Transatlantic Trade and Investment Partnership (TTIP) negotiations
with the EU, but the June 23 vote by the U.K. to leave the EU (known as Brexit) could
lead to “adjustments of offers and expectations”
by the U.S. for it to be able to close the negotiations.

“What we're wrestling with is that the U.K. is a very significant part of the EU,”
and Brexit could make TTIP “less attractive,” Froman said in a briefing with reporters
hosted by the Christian Science Monitor.

He noted that the U.K. is the fifth largest economy in the world and the third largest
in the EU, representing 25 percent of government procurement opportunities in the
EU, which will be “taken off the table” by Brexit. This would have an effect on what
the U.S. offers and what the EU would have to offer in the negotiations, he said without
going into specifics of the confidential talks. Froman's office would not elaborate
on his comments.

The U.K. also accounts for 45 percent of U.S. exports to the EU, he said: 20 percent
of goods;
30 percent of services; 40 percent of aerospace; 26 percent of auto parts; and 48
percent of consumer goods, Froman said.

EU trade officials could not be reached for comment on Froman's statements.

Deepening Relations

“We do want to maintain and deepen our relationship with the U.K.,” he said in response
to a question on a recently introduced congressional resolution for a U.S.-U.K. bilateral
trade agreement (135 ITD, 7/14/16).

Froman said he was in discussions with his British counterparts as recently as July
13. The U.K. is permitted to have trade discussions while being a member of the EU,
but the U.K. is not yet permitted to sign new trade agreements, he said, adding: “where
discussions end and negotiations begin is, I think, a gray area.”

The top U.S. trade official said it is still unclear whether the U.K. will have sovereignty
over tariffs once it leaves the EU, depending on the model the two sides agree to
follow. In addition to a bilateral trade pact with the U.S., Froman said it is possible
that the U.K. could rejoin the TTIP at some point in the future, or even the Trans-Pacific
Partnership (TPP)
agreement among the U.S. and 11 other Pacific Rim countries.

Froman was optimistic the TPP would be ratified by Congress in 2016, noting, in a
reference to the presidential election, “if it’s not done this year, it’s quite unclear
when it would get done, given the broader political developments.”

TPP: Ironing Out Issues

To that end, his office, working with lawmakers and stakeholders, has ironed out concerns
voiced by the dairy, pork and financial services industries, which now support the
pact. He said intellectual property rights protections for biologic drugs remain an
outstanding issue and work continues with Congress and stakeholders to resolve the
issue.

Froman said a key factor in the debate is that U.S. lawmakers do not want to cede
the high ground on trade policy to China by foregoing passage of the TPP. This outcome
that would “give the keys to the castle” to China by not executing the U.S. strategy
of rebalancing toward Asia and allowing Beijing to execute its multi-pronged strategy.
The TPP trade agreement is the “most concrete manifestation” of U.S. strategy, Froman
said of the agreement that is pending congressional ratification.

Lawmakers are aware that U.S. allies and trading partners are afraid the U.S. won't
be able to deliver, he said, saying China is moving ahead with its strategy. Beijing
is in talks for its 16-nation regional trade agreement, the Regional Comprehensive
Economic Partnership. It also is pursuing infrastructure development initiatives with
some of its neighbors and making territorial claims in the South and East China seas.

To contact the reporter on this story: Len Bracken in Washington at
lbracken@bna.com

To contact the editor responsible for this story: Jerome Ashton at
jashton@bna.com

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